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Dow Drops; Famine in Africa

Aired August 8, 2011 - 18:00   ET


WOLF BLITZER, CNN ANCHOR: Happening now, breaking news. Wall Street's worst day since the 2008 meltdown. After the U.S. suffers a credit downgrade, the bottom falls out on the Dow. It's down 634 points today, paper losses for investors on this day alone $1 trillion.

With the market downturn, the 2012 Republican candidates step up the blame game over America's credit downgrade. President Obama makes some charges of his own.

And misery in the Horn of Africa. A merciless drought leaves hundreds of thousands in the grips of famine. CNN's Dr. Sanjay Gupta is joining us live this hour from a refugee camp.

We want to welcome our viewers in the United States and around the world. Breaking news, political headlines and Jeanne Moos all straight ahead. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

A sickening plunge on Wall Street as the Dow drops 634 points. That's 5.5 percent loss. The S&P fell 6.5 percent, and the Nasdaq fell 7 percent. The loss to investors, at least on paper, $2.9 trillion since July 22, almost $3 trillion in lost equity. The S&P is now down nearly 18 percent from its April high. The Dow is down more than 1,800 points or about 15 percent in the last 11 trading days.

Fears of a global economic slowdown sparked frenzied selling around the world, but the downgrade of the U.S. credit rating by the rating agency Standard & Poor's seemed to stun America's investors. That downgrade cutting the U.S. rating to AA-plus came after Friday's market close, allowing plenty of time over the weekend for fear to build up.

President Obama came out today. He tried to offer some reassurance saying the country's economic problems are solvable.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Markets will rise and fall, but this is the United States of America. And no matter what some agency may say, we've always been and always will be a AAA country.


BALDWIN: All right, let's bring in CNN's Erin Burnett in New York.

You have been speaking to a lot of analysts out there. What's the best reasoning why this happened today?

ERIN BURNETT, CNN CORRESPONDENT: Well, you know, Wolf, a lot of people expected this. You know, we talked a lot about it. S&P has been talking about a potential downgrade for months.

And it was the right thing to do to go ahead and give the downgrade. It was much more symbolic. So it was sort of what I would say, Wolf, an emperor has no clothes moment. We're still the emperor, but all of the sudden, someone said the truth. Guess what, America? You don't have any clothes on and you don't look very good when you look into the mirror.

And I know that sort of makes you chuckle, but that's sort of what this is. We have a debt problem, we have known about it, and now we actually have to face it. That's one thing, just the harsh reality of the situation actually hitting us in the face. And it also reminded investors that this downgrade and the outlook for America's debt situation comes on top of a weakening economic situation.

And that is the most important thing. Obviously, you have worries around the world with places like Greece and Spain and Italy and Japan and you name it. Right? You put all that together, and this was sort of the cherry on the top and an emperor has no clothes moment. That's why you saw the big sell-off today.

BLITZER: How much worse is it possibly going to get?

BURNETT: I wish I knew the answer to that, Wolf. But I would say this. It could get worse. You remember those moments, those sickening moments in the fall of 2008 when we had these in a couple of hours several hundred-point swings. And, of course, we had that flash crash just over a year ago. We could go down further.

Pretty much everybody that I have spoken to, the big investors out there, think that the market has sold off too far, too fast. That doesn't mean that they are going to jump in and start buying immediately. So you're not going to get all this back quickly. But you may stabilize a little bit. And it often is the difficulty for the little investor is the regular guy usually sells when things are at their worst. So this may not be the best time to sell, and that does not mean you should jump in and buy with two feet, though.

BLITZER: And what's probably going to make matters worse is the political blame game that we see going on here in Washington, the right blaming the left, the left blaming the right. That's not going to necessarily reassure a lot of jittery investors out there.

BURNETT: No. And that's a big part of the problem.

S&P called it out fairly. This is the frustration everybody feels, is that Washington isn't getting anything done, Wolf, and they certainly have shown a complete inability to deal with the debt problem in this country. Both sides of the aisle have been completely unable to make the tough decisions.

And I think that's a frustration we all share and investors around the world share. You have got Congress. Maybe they should come back. Well, the people would say, no, don't go and have them come back. What will they really accomplish? But something needs to happen to show that the United States is the leader that the world is looking for.

And that perhaps, Wolf, could come from the Fed tomorrow. Ben Bernanke, one of the most respected people in the world, a voice of calm, a voice of reason, is going to come out and talk about interest rates, and there are several things he could do tomorrow afternoon that could really provide some calm and leadership in the markets around the world. They really can only get that leadership from one place, and that's right here in the U.S.

BLITZER: That's what we need, a little calm and excellent leadership right now on this issue.

I guess what a lot of people are afraid of is another double-dip recession happening, Erin. How close are we to a double-dip recession?

BURNETT: It's tough, Wolf, because as I know you have talked a lot about, a lot of is semantics. Technically, we have been out of the recession for a couple of years. Obviously, for most Americans with their home prices off more than 30 percent from the highs, and unemployment the way it is, a lot of people would say it's ridiculous to say we ever came out of the recession.

Technically we did, but the numbers have been getting weak. As you know, the first two quarters of this year, January through June, the growth numbers were abysmal. We were only growing at 0.4 percent in the first quarter of this year. That's not good. And you had consumer spending coming in with a cut, a drop, for the first time in two years in June. Those numbers are not good.

However, when you look at the Wall Street projections, even though they have all come out and cut their expectations for growth in our economy for the rest of the year, they all describe the July jobs report we just got as solid, Wolf, and they don't think we're going to see a double-dip.

But I would say if you don't get this leadership right now, you aren't going to get companies investing, people making decisions for those big-ticket items, and this whole psychology moment that we're in right now could become a self-fulfilling prophecy.

BLITZER: It's a good point, Erin. Thanks very much. We will check back with you.

We saw today how the downgrade of the U.S. debt hit the stock market. That's a serious blow to the retirement accounts of many Americans. But now S&P has downgraded the government-backed mortgage brokers as well, Fannie Mae and Freddie Mac. To find out what that means for you, we asked our own Lisa Sylvester to take a closer look, because these aren't just numbers we're talking about. These are people's lives, their portfolios, the way they can put food on the table, if you will.

LISA SYLVESTER, CNN CORRESPONDENT: Yes, and their homes included in that list, Wolf.

And in the short term today, we saw interest rates, they went down. But over the next few weeks and months, there is a very good chance the downgrade of Fannie Mae and Freddie Mac will mean that if you are shopping for a new house, it is going to cost you more.


SYLVESTER (voice-over): There's a good chance that your mortgage loan is either owned or backed by either Fannie Mae or Freddie Mac. These private companies that receive private federal funding own or guarantee half of all mortgage loans in the United States. That's some 31 million homes. S&P downgraded Fannie Mae and Freddie Mac from AAA to AA-plus. In a statement, S&P said the downgrades reflect their direct reliance on the U.S. government.

Lawrence Yun is with the National Association of Realtors.

(on camera): What impact will this downgrade have?

LAWRENCE YUN, NATIONAL ASSOCIATION OF REALTORS: Well, certainly the downgrade can have a negative impact in terms of rising mortgage rates, and also you can damage consumer confidence. Many people who are ready to enter the housing market may now become more hesitant about entering.

SYLVESTER: Interest rates have been at historic lows, but the downgrade could over time reverse that trend. If that happened, families with adjustable rate mortgages ready to reset would have to pay more for their homes.

Another worry is that the downgrade could lead to a further tightening of credit standards.

ALEX POLLOCK, AMERICAN ENTERPRISE INSTITUTE: That makes it hard to get a loan. Even though the rate may be very low, it's hard to get the loan at all. And that retards the recovery.

SYLVESTER: But so far, bond investors have not been panicking. In fact, interest rates were down for the day as investors fled stocks and looked for a safe place to park cash.

YUN: Interestingly, what's happening today after the announcement of a downgrade is that interest rates are actually lower, which is quite surprising that the global bond investors feel comfortable even with a downgrade to hold onto U.S. government debt or Fannie and Freddie debt.

SYLVESTER: Interest rates down for now, but with plenty of uncertainty, that could change at any time.


SYLVESTER: Freddie Mac and Fannie Mae declined interview requests and they did not issues any statements after the downgrades. And next up for downgrades could be some of the individual states and cities whose credit is tied into the federal government -- Wolf.

BLITZER: That could presumably spark a little bit more jittery reaction on Wall Street. If you see states like Maryland or Virginia, some of the other states whose own credit ratings tied to the U.S. government, that could have a serious effect.

SYLVESTER: Yes. We are keeping a very close eye on this, because that announcement could come at any time. It was something that Standard & Poor's initially said that they were going to keep an eye on them and have them on a watch. So now we are waiting to see if they actually act on that, Wolf.

BLITZER: You will stay on top of this for us. Thanks, Lisa. We know we can count on you for these kinds of stories.

By the way, if you want to read my blog, go to I write about this horrendous day on Wall Street today,

A political blame game over the U.S. credit downgrade and the stock market downturn, and the Republican presidential candidates are playing to win. CNN's Joe Johns and David Gergen, they're both standing by live.

And the Horn of Africa in the grip of famine, 100,000 starving people desperate for food and water. Our own Dr. Sanjay Gupta is at a camp for Somali refugees. We're going there live.

And the fallen SEALs, they were warriors on the battlefield, beloved sons, fathers and husbands on the home front.


BLITZER: Jack Cafferty is here with "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Wolf, President Obama's chances of winning a second term as president might have been downgraded right along with the country's credit rating.

Here's a partial list of some of the stuff currently working against him. We have an unemployment rate that remains stubbornly above 9 percent. The stock market is in the toilet, down 630 points today, 513 points last Thursday, trillions of dollars simply evaporating from people's portfolios.

We had the historic downgrade in our credit rating, the first time ever in U.S. history that it's happened. And it happened on President Obama's watch. That's not good. There's also a possibility of a further downgrade if we don't straighten out our debt situation. And that's doubtful after watching the charades in Washington that passed for negotiations on the debt ceiling. Economic growth under 2 percent and slowing, with many worried that we could be headed for a double-dip recession. Home values worth a third less than they were five years ago.

Only 58 percent of working-age Americans are actually in the labor force. That's the lowest in almost 30 years. Consumer confidence at two-year lows, polls showing majorities disapprove of President Obama's handling of the economy.

All this, of course, not lost on the Republican candidates for president. They have already linked President Obama to the S&P credit downgrade and the weak economy. And you can believe that they will ramp up their criticism as the election gets closer.

Perhaps the only thing working in President Obama's favor is he's got some time. The election is still more than a year away. That's a lifetime of politics. But suffice it to say that if the election was held today, he would be back organizing communities. If the president is going to turn this thing around, he better get started. Americans who are out of work and watching their life savings evaporate in a falling stock market probably don't have much patience left.

So here is the question. Is the economy killing President Obama's chances of a second term?

Go to Post a comment on my blog.

He's got some real problems going into a campaign next year, Wolf.

BLITZER: Yes, he does. But as you correctly point out, more than a year to go, and that is a lifetime in politics.

CAFFERTY: Well, that Republican bunch ain't exactly a Mensa meeting.


CAFFERTY: So, they're liable to do something stupid between now and then.


BLITZER: We will see who -- once there's a Republican nominee, it changes the scenario...


CAFFERTY: Absolutely.

BLITZER: We will see who that is.


BLITZER: Jack, thank you. President Obama says 30 U.S. troops who lost their lives when their military helicopter was shot down in Afghanistan this weekend represent the best of America -- 22 were Navy SEALs from that same unit that carried out the raid that killed Osama bin Laden.

And we're learning much more about these warriors on the battlefield. They are husbands, they are fathers, they are sons at home.

Let's go to CNN's Brian Todd. He is joining us now from Virginia Beach, where many of these SEALs were based together with their families.

What's going on there today, Brian?

BRIAN TODD, CNN CORRESPONDENT: More grieving, Wolf, a town really reeling from this news over the weekend.

While they were alive on and on their missions, we could never learn who the SEALs were or what they were doing. But now we are getting an extraordinary window into their lives back home.


TODD (voice-over): We have that rarest of opportunities now to see them not as nameless, faceless, fearless warriors, but as friends, fathers, husbands.

And Kimberly Vaughn is giving us even more, a glimpse into her last conversation with her husband, Aaron, just hours before he and 21 other Navy SEALs were killed in a helicopter crash in Afghanistan. She says Aaron reached her and their young children on the phone as they were driving.

KIMBERLY VAUGHN, WIDOW OF NAVY SEAL: So he got to talk to me and talk to my son in the back seat. It was actually a great conversation. It was probably just about time before he went out to work that night. But we got to tell each other we loved each other. So it was a great conversation to have.

TODD: Kimberly says Aaron was eager to get back into combat and return to Afghanistan just three weeks after their daughter Chamberlyn was born.

(on camera): Over the past year-and-a-half, three Navy SEALs who worshipped at this church were killed in action, including two in the latest incident. Here and elsewhere in the community, the picture that we're getting of these men is that on the one hand, they possessed extraordinary valor. But on the other, they were a lot like the rest of us.

(voice-over): John Gillis, a deacon at the church, chokes up as he thinks of the sacrifices make by parishioner Kevin Houston and others.

DEACON JOHN GILLIS, ATLANTIC SHORES BAPTIST CHURCH: The commitment that they put into this country, while we're out doing the simplest things in life, they are out doing incredible tasks that many of us don't -- I mean, may not care to know about, but they're doing it. And for them -- to just know them on a personal level too, and to see the sacrifice their family is making, and just further sacrifice, just hurts. It hurts us all. It shocks us all.

TODD: Whether it's Kraig Vickers being remembered as a hulking but good-natured football player from Hawaii or Michael Strange being recalled as a witty, streetwise kid from Philly, we are now seeing superheroes as humans.

(on camera): Talk about the pride in the community in Virginia Beach in these guys.

WILLIAM SESSIONS, MAYOR OF VIRGINIA BEACH, VIRGINIA: They were soccer coaches, swim team coaches, volunteers all across the city. You don't even know what they do. And that's by design.


TODD: And as we see the flags here in Virginia Beach at half- staff, we're told that people here really won't be able to mourn the SEALs in a public way. The mayor says that because these were men in such highly secretive units, the city can't hold any public memorials for them. Those services, he says, will be held on their bases -- Wolf.

BLITZER: Brian, we're getting some new information on the return of the bodies to the United States. What are you learning?

TODD: That's right.

We're told by military officials that the bodies of all 38 American and Afghan service members who were killed in that crash took off from Afghanistan a short time ago. They should be arriving at Dover Air Force Base some time on Tuesday.

Now, the reason that the Afghan remains have to be brought back to Dover along with the American remains is because the nature of the crash was so catastrophic that they have to be able to identify all the remains. They are going to try to do that at Dover. Once the remains are all identified, then the Afghan remains will be returned home.

BLITZER: Brian Todd, thanks very much for that report -- Brian working the story in Virginia beach, Virginia.

The Dow plummeted today. Standard & Poor's says that the U.S. could get its AAA credit rating back on condition, if Capitol Hill can come together without all the partisan infighting that we have been seeing. Is that really possible, though? We're taking a look at the bigger picture.

And on the front lines of America's famine. CNN's Dr. Sanjay Gupta will take us to a tent camp, desperate refuge for hundreds of thousands of starving families. We will go there live. Stay with us. You're in THE SITUATION ROOM.


BLITZER: It was Wall Street's worst day since the meltdown of 2008. The Dow alone dropped 634 points. This comes amid a political blame game over the U.S. credit downgrade and the stock market downturn. And the Republican presidential candidates are playing to win.

Let's bring in CNN's Joe Johns. He's been looking at the escalating war of words. And it really is heating up.

JOE JOHNS, CNN SENIOR CORRESPONDENT: It is, Wolf. The Republican presidential candidates are doing what presidential candidates do. And if you were expecting some change in politics as a result of the downgrade, it frankly has not happened, at least not yet.


JOHNS (voice-over): On the campaign trail, Republican reactions to the downgrade were just about as predictable as the downgrade was itself.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: During the last two- and-a-half years, this president is primarily responsible for the failure of this economy to reignite and for his own failure to take the action which is so obviously needed to restore our balance sheet. Standard & Poor's did not surprise anybody with this downgrade.

JOHNS: Though the evidence is overwhelming that both parties, both houses of Congress and the current and prior administrations all share the blame for the downgrade, in the altered reality of a campaign, it's mainly about what works.

TIM PAWLENTY (R), PRESIDENTIAL CANDIDATE: I think as we're gathered here this morning what we should be talking about is downgrading Barack Obama.

JOHNS: Presidential candidate Michele Bachmann, whose recall of history has actually been questioned before, nailed it this time.

REP. MICHELE BACHMANN (R-MN), PRESIDENTIAL CANDIDATE: We went through the Great Depression. We went through World War II. We went through Korea. We went through Vietnam. We went through the conflicts in the Middle East. And we went through 9/11. Not once did any president ever lose our AAA credit rating, not once.

JOHNS: And Jon Huntsman, who once was the president's ambassador to China, played his rendition of "Hit the Road, Jack," for the benefit of the president and then talked about job growth.

JON HUNTSMAN (R), PRESIDENTIAL CANDIDATE: I don't know about you, but the president has had two-and-a-half years to address the most pressing problem we as Americans face, infusing confidence in our overall direction, dealing with job growth and getting our economy going again, and he has failed us.


JOHNS: Meanwhile, a new CNN/ORC international poll shows the president's approval ratings remaining steady in the mid-40s, which would suggest that all the upheaval over the last couple weeks has not affected overall views of President Obama, though only 39 percent of respondents said they approve of the way he has handled the unemployment situation -- Wolf.

BLITZER: More worrisome to the president, the right track/wrong track numbers, more Americans think the country is on the wrong track than on the right track, and that's always from a political point of view very worrisome. Joe Johns, thanks very much.

So how much of the credit downgrade and the freefall on Wall Street that we have been seeing can be blamed on the way lawmakers handled the debt ceiling crisis? President Obama had a few barbs of his own today. Listen to this.


OBAMA: We knew from the outset that a prolonged debate over the debt ceiling, a debate where the threat of default was used as a bargaining chip, could do enormous damage to our economy and the world's.

John Boehner and I came up with some good proposals when we came close to agreeing on a grand bargain.

So it's not a lack of plans or policies that is the problem here. It's a lack of political will in Washington. It's the insistence on drawing lines in the sand, a refusal to put what's best for the country ahead of self-interest or party of ideology. And that's what we need to change.


BLITZER: All right, let's bring in our senior political analyst, David Gergen.

David, I know everyone says there's plenty of blame to go around. Both sides of this political spectrum are at fault, but is there one side more at fault from your vantage point right now?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: Well, I think, listen, the Republicans used the debt ceiling as leverage to get spending cuts. And they wound up with the Tea Party taking an awful lot of the blame.

And I think the Tea Party and the sort of the -- the non- compromising stance was a serious contributing factor. But, you know, the White House had an awful lot of opportunities that it missed on this. The Democrats in Congress, you know, objected to a lot of the entitlements. Well, I think it is more equally blamed. But I think, Wolf, the problem now is that that whole debacle over the debt ceiling, the process, created a sense of disgust out there in the investment community. And then along came S&P and the downgrade, which just confirmed and solidified the disgust and the outrage over the weekend that led to today's rout on Wall Street.

BLITZER: It was almost like a whole bunch of things came together for this perfect storm, if you will, including Italy and Spain, deep concerns in Europe about what's going on over there and fears of a double-dip recession. When you combine all of that, we see the result, $2.9 trillion in equity here in the United States disappearing, at least since July 22, David.

GERGEN: Absolutely. Wolf, I just came back from the United Kingdom. I was there for about 10 days.

And I must tell you that the same kind of fear and anger and frustration that you see here, you find there with their governments. There is a sense that the underlying economy has some strengths, but that the politicians are completely ineffectual at dealing with their debt crisis. And that debt crisis has now moved from the periphery of Europe into Italy and Spain.

And Italy and Spain are the third and fourth largest economies in the Eurozone. And back here, you find on Wall Street there is first and foremost a concern about where the U.S. economy is going. But there is this second issue about Europe. And if Europe starts going down, who's going to bail it out? The Europeans don't have the money, and the Germans won't pay for it.

As someone pointed out to me today, the IMF, the International Monetary Fund, may have to come to the rescue. And who pays for the IMF? Good old Uncle Sam. We do. And we don't have the dough to pay for that. So this is a cascading series of problems, as you point out, sort of the perfect, the perfect terrible storm.

BLITZER: Timothy Geithner, the treasury secretary, announced over the weekend he is staying. He is not leaving. The president welcomed that decision.

But a whole bunch of Republicans today, including Jim DeMint, the senator, Michele Bachmann, the Republican presidential candidate, the Republican Party chairman, Reince Priebus, they are all calling on him to resign. They're pinning the blame on him is.

Is that fair criticism?

GERGEN: No, I don't think so. They're going to make him a scapegoat, but that's typically what an out party does. They -- instead of aiming their fire at the president, they aim at someone very close to him. And he'll -- he'll pay that price.

But I think the president made the right decision in asking Tim Geithner to stay. He's the senior person there. He's the biggest heavyweight. What they do need to do, Wolf, is that their chief economist in the White House, Austan Goolsbee, just had his last day, as you know, on this past Friday. It's astonishing they don't have a replacement there in place. And in fact, what they really need is a gold-plated, very big heavyweight economist to come in there and help fortify this team with Geithner and with others.

BLITZER: Good advice for the White House from David Gergen, who's worked for four American presidents. As usual, David, thanks very much. And good blog -- a good piece you wrote at, as well. Let me tell our viewers to go read it. They'll learn something. Appreciate it.

GERGEN: You're very kind. Thank you.

BLITZER: Thank you, David.

Stand by.

All right. This just coming into THE SITUATION ROOM. The Senate Banking Committee has begun what's being described as an unofficial initial review of the S&P downgrade of the U.S. credit standing. Congressional sources are saying the committee is looking into the issue and gathering more information right now.

Meantime, the committee chairman, Tim Johnson of South Dakota, calls the Standard & Poor's move, and I'm quoting him now, "irresponsible." We'll watch this story.

Lots of hard news coming up, including blackouts, bread lines, and air strikes. CNN's Ivan Watson takes us behind the scenes in Libya's capital, a city under siege.

And misery in the heart of Africa. A merciless drought leaves hundreds of thousands in the grip of famine. CNN's Dr. Sanjay Gupta, he'll join us live from a refugee camp in Africa.


BLITZER: Incredible shocking images coming out of London tonight. Take a look at this. Buildings engulfed in flames as gangs of youth rampage through parts of the British capital. It's the third straight day of rioting following the fatal police shooting of a young man.

Rioters smashed store windows, set cars and buildings on fire, and clashed with police. More than 200 people have been arrested. The British prime minister, David Cameron, is cutting his summer holiday short to return home for an emergency meeting, foreign emergency meeting, with his home secretary and the London Metropolitan Police commissioner.

In Libya, an international blockade of airports and seaports controlled by Moammar Gadhafi is making life harder on ordinary Libyans. The embargo has contributed to widespread fuel shortages and electricity blackouts. The Gadhafi regime also accusing NATO of bombing electric power stations and pipelines, charges the military alliance denies.

Let's go to the Libyan capital of Tripoli. That's where CNN's Ivan Watson is watching what's going on.

What happened today, Ivan?

IVAN WATSON, CNN CORRESPONDENT: Well, Wolf, let me just bring you the latest news. We're getting bulletins out of the eastern rebel capital of Benghazi, according to the Reuters news agency.

That transitional national council there that is basically meeting and governing the rebels has announced that it has dissolved its 14-member council, according to the Reuters news agency. Political turmoil in the wake of the murder of the rebel military commander last month. And we'll be following this story and bringing you more on that.

Wolf, back here in Tripoli, meanwhile, a hardship for ordinary Libyans as a result of this blockade and the tightening siege on Gadhafi's stronghold. Take a look at this report.


WATSON (voice-over): This is what downtown Tripoli looks like on Saturday night. Pitch black on El Rashid (ph) street, except for the lights of passing cars. Widespread power outages have plunged entire neighborhoods into darkness.

On a daytime visit to a market district, some people told us they hadn't had electricity in days.

"Over the last two weeks, it got really bad," says this shopkeeper named Ridah (ph). "People are used to having air conditioning. We can't keep our food from spoiling. And some babies just can't take the heat."

UNIDENTIFIED MALE: The situation makes the Libyan people angry, bored, get tired from everything.

WATSON: Tripoli's also suffering from crippling fuel shortages, causing huge gas lines and even forcing some drivers to simply abandon their cars.

Hope for a reprieve died last week, when Libyan rebels somehow captured this Libyan fuel tanker off the coast of Malta. Instead of docking in Tripoli, the Carta Jena (ph) and its precious cargo of tens of thousands of tons of fuel sailed into the rebel capital of Benghazi on Thursday, flying the rebel flag.

Officials in Tripoli are accusing NATO and the rebels of carrying out an act of piracy, charges the alliance denies.

KHALID KAIM, DEPUTY FOREIGN MINISTER: With this fuel tanker ship arriving in Libya, that's -- we would have managed to rationalize the consumption of fuel for at least three or four months. And that would lower the pressure on the protection. WATSON: Bread lines. There's no question the international blockade of the Gadhafi regime is making life harder for ordinary citizens, and many here blame NATO.

UNIDENTIFIED FEMALE: Go, go, go. Go, go, go, go, go, go. What you do here? Go, go.

UNIDENTIFIED MALE: Maybe if NATO would stay away from us, and kept it for the Libyans themselves, it would be much better.

WATSON: But in restive neighborhoods like Sucalduma (ph), where residents say Gadhafi's security forces have rounded up and arrested hundreds of local men, some Libyans secretly told us they support the campaign to overthrow the man who's ruled the country since 1969.

UNIDENTIFIED MALE: We want freedom. But...

WATSON (on camera): Freedom from what?

UNIDENTIFIED MALE: Freedom for everything. We don't see freedom from 1969. We don't see the freedom, never here.

WATSON (voice-over): And so the siege of Tripoli continues. With some neighborhoods dark from blackouts, while near nightly air strikes leave other parts of the city burning.


WATSON: Now, Wolf, the Gadhafi regime is accusing both NATO and the rebels of bombing electric power lines and sabotaging fuel pipelines, and that is causing some of the power shortages. We reached out to NATO. They denied those allegations, saying they bomb strictly military targets -- Wolf.

BLITZER: And Ivan, you're in Tripoli, the Gadhafi-held area. How hard is it for a reporter like you to actually speak with Libyans who oppose Gadhafi?

WATSON: Pretty darn hard, Wolf. We're pretty closely controlled by the Gadhafi regime here.

And to be fair, you know, governments that they feel we represent as media, the U.S., France, Britain, have been bombing this country for months now. So we're viewed by many here, and they tell us by the Gadhafi regime officials, that we are spies or agents. Trying to talk to somebody who opposes regime is quite difficult.

The man I spoke to, I managed to slip away from my government minders for about a half hour and speak with this guy on the street in a neighborhood where many of the people clearly do not like this government, and they claim that more than 1,000 of their young men have been rounded up, arrested in recent months. Claims that are very hard for us to confirm.

BLITZER: Ivan Watson is one of our courageous reporters on the scene for us in a dangerous area in Tripoli. Ivan, thanks very much. Good work.

The United Nations is rushing in food aid to famine-plagued Somalia, but it's already too late for 30,000 children. Thirty- thousand children dead of hunger. CNN's Dr. Sanjay Gupta is in the region right now. He's in a massive tent camp where thousands of refugees are arriving every single day. Sanjay is standing by to join us live, right here on THE SITUATION ROOM.


BLITZER: The White House has just announced that the president has authorized some $10 million in emergency aid to help the starving people in the Horn of Africa. Unexpected urgent refugee and migration needs related to the Horn of Africa, that's the headline from the White House memorandum.

Let's go to scene right now. Our chief medical correspondent, Dr. Sanjay Gupta, is joining us now from a refugee camp in Kenya, not far away from Somalia.

Sanjay, you've covered some horrendous stories for us. But we have literally tens of thousands, if not hundreds of thousands of starving people, so many children who are starving. What have you seen there?

DR. SANJAY GUPTA, CNN CORRESPONDENT: Well, this is the largest refugee camp in the world, Wolf. And that should tell you a lot right there. One of the things that struck me right away was that -- just how much of a chronic problem what we're describing has been for some time out here.

This particular refugee camp had about 300,000 people in it a year ago. And over the last year, they've added another 100,000. About 400,000 people here now. It's only designed to hold about 90,000 people, Wolf. So you can just get an idea of just how -- how overcrowded the conditions are, how tough the conditions are.

What happens, Wolf, as you've heard now, is that because of this drought, the worst that it's been seen in the last 60 years, you know, crops died. Livestock that were dependent on those crops died. And people who were dependent on the livestock, they had to immigrate. They had to leave. They had to walk sometimes up to 100 kilometers.

We met a family yesterday, Wolf, that had been walking literally for over a month to try and get from where they were in Somalia to this refugee camp. They made it with three small children, but they're the lucky ones. They get in, you know, very malnourished, very emaciated, very much in need of medical care.

And now what they're anticipating, Wolf, is that the numbers are going to continue to increase, up to 2,000 refugees a day, Wolf. So, you know, the problem as it stands right now continues, maybe even getting worse.

BLITZER: So why, based on all of the reports I've read, Sanjay, are there so few doctors, nurses, medical experts, medical resources? This is Kenya. It's not Somalia. Kenya, it shouldn't be that difficult to get the kind of help that these people so desperately need.

GUPTA: I think that the problem is not so much here in Kenya, Wolf. I think they are starting to get resources here, and those resources are improving. Like I said, some of the camps here, some of them have been here for 20 years, really since 1991, when they went through -- started the beginning of a famine again around that time.

I think the problem has been in part because of the conflict that has been -- that has existed in Somalia for a long time. There's been a ban on any kind of western aid coming into the country. And as a result, aid workers in the past have been killed.

That ban has been lifted, as you may know, Wolf, over the last several days. But there's still an atmosphere of mistrust. So people have to still cross the border to get here to Kenya. When they get, they start to get more of the resources they need. They obviously need to expand this camp to take care of all these people. That's starting to happen.

But what they'd love to do, Wolf, is actually take some of these resources, take some of that aid, take some of those doctors, and move them into Somalia. Once there's enough of a trust that they're -- you know, these people are not going to be harmed.

You may have heard, Wolf, yesterday for the first time in five years some of those resources were flown into Mogadishu, because the rebels -- the -- I'm sorry, the militants have moved out of the capital. They say they felt comfortable enough taking some of that aid directly into the capital. That needs to happen more so that this problem can start -- start to be addressed here.

BLITZER: Sanjay, be careful over there. We'll stay in close touch with you. Thank you very, very much for the reporting that you're doing.

And this important programming note to our viewers. Beginning tonight "AC 360" is moving to a new time, 8 p.m. Eastern. Anderson Cooper along with Sanjay Gupta, they will be reporting live tonight from Africa on the region's devastating famine. Remember, starting tonight and every week night, 8 p.m. Eastern. It's "ANDERSON COOPER 360." Tonight, a special report, "Somalia: On the Frontlines of Famine."

And remember, you can help what's going on. Go to You can impact your world. If you would like to help these starving people, and I know you do, the starving people in Africa.

President Obama plans a Midwest campaign bus tour next week. But is the economy ruining his chances of a second term? Jack Cafferty has your e-mails. Stand by for that.

And also find out what surprise stowaway forced a Delta plane to change course and make an emergency landing. (COMMERCIAL BREAK)

BLITZER: Let's get right back to Jack for "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: The question this hour: "Is the economy killing President Obama's chances for a second term?"

J.R. in Washington: "While I wouldn't rush to the polls to vote for President Obama again at the moment, I'm not exactly enthusiastic about the Republican candidates either. Which have the geniuses on the right would you like to see in office? Mitt 'Hey, Guys, I'm Unemployed, Too' Romney? How about Sarah 'I Can See Russia from My House' Palin? Oh, I know, let's go for Rick 'Pray for a Solution' Perry. Sorry, Jack, unfortunately, the Republican candidates basically ensure President Obama's re-election at the moment."

Jason writes on Facebook, "Yes, he's been in office for more than two years now. He's primarily responsible for not preparing, leading and coming up with a solution to the problem. He is the CEO of this country and is ultimately responsible for whatever happens. Time for the board, the citizens, to make a change."

Dennis in North Carolina: "I think Obama will win a second term. Hopefully, he'll have a Congress who will work with him and not the Tea Party crazy people."

Dan writes, "If it is, I for one don't care. He was the first president to get a health plan passed. He was also in power as the first downgrade hit the U.S. credit ratings. If we go into another recession, what do you think the people are going to remember the most?"

Nick writes, "Listen to the president's comments today. 'I have a plan, I'll tell you about it in two weeks. Oh, and by the way, I have two fundraisers tonight.' The president with the thinnest resume in our country's history, that's what you get."

And Roy writes, "You've got it backwards. It's not 'is the economy killing President Obama's chances?" It's 'Is President Obama killing the economy?'"

You want to read more on this, you'll find it on my blog at Or through our post on THE SITUATION ROOM's Facebook page. Check that deal out.

BLITZER: I know you love that Facebook page, especially on this, Jack, the sixth anniversary. Happy anniversary to THE SITUATION ROOM. We started exactly six years ago today.

CAFFERTY: I know. Your hair was dark, and I had some. And it's been fun.

BLITZER: A good six years. Now to the next six. Jack, thanks very much. The Dow took a brutal beating today as a wave of fear swept through the global markets. Now investors are bracing for tomorrow's open. How bad can it get? A former member of President Obama's team will be on JOHN KING USA at the top of the hour. That's coming up for our North American viewers.

And midair diversion. A swooping bat -- yes, a swooping bat -- causes a sensation on a Delta flight.


BLITZER: Here's a look at some of this hour's "Hot Shots."

In India -- look at this -- children swim in a flooded street after heavy rain.

And in Iraq, bakers roll dough that will be used to make traditional food for the Ramadan holiday.

In China, a man watches waves roll in as a typhoon hits the coastline.

And in Germany, check it out, a seal sleeps upside down in the water of his aquarium.

"Hot Shots," pictures coming in from around the world.

Passengers got the surprise of their lives on a Delta flight. Look at this: a bat swooping around the cabin. Here's Jeanne Moos.


JEANNE MOOS, CNN CORRESPONDENT (voice-over): Look at the wing span. No, not on the plane, on the bat. A bat aboard an Atlantic Southeast Airlines flight, not from Transylvania but from Madison, Wisconsin to Atlanta the other day.

MIKE SCHMIDT, AIRLINE PASSENGER: I saw this flying critter going up and down the cabin.

MOOS: So naturally Mike Schmidt took out his camera phone.

SCHMIDT: They were trying to swat at it with newspapers and magazines, anything they had in their hand.

MOOS (on camera): The airline says it doesn't know whether it was a bat or a bird, but Mike Schmidt knows.

SCHMIDT: I know for a fact it was a bat. I've seen 100,000 bats in my life. It had, you know, cut outs on the wings.

MOOS (voice-over): Now, the passengers did not trap the bat using the time-honored techniques demonstrated in movies like "The Great Outdoors."

JOHN CANDY, ACTOR: He's on my face! He's on my face! UNIDENTIFIED FEMALE: No!

MOOS: No, the passengers of Flight 5121 employed the "close the lavatory door on him" technique.

UNIDENTIFIED MALE: He'll go in the bathroom.

MOOS: The passengers clapped and gave the thumbs up.

(on camera) So the bat is trapped in the lavatory, the plane is diverted back to Madison, Wisconsin, so that ground personnel can search for the bat and remove it.

(voice-over) The thing is, they couldn't find it. The airlines says, "Although the animal was not located, we are confident in the maintenance search and that the animal was no longer on the aircraft at the time of the next departure."

It's funny: last time we heard about a bat in a bathroom, it was a French prankster hanging upside down. Remi Gaillard posted video of his bat antics on his Web site

But a guy dressed up as a bat can't top the real thing. Mike Schmidt thinks he knows where the trapped bat went by process of elimination.

(on camera) You mean you think it actually went down the hole?

SCHMIDT: The toilet seat was up. And that bat was flying around in there, and it found it way down that hole somehow.

MOOS: Yuck. That's not a bat out of hell. That's a bat into hell.

(voice-over) A hellish under world. Though we don't know how he managed to flush himself, this is one bat that really did go bat (EXPLETIVE DELETED).


MOOS: Jeanne Moos, CNN, New York.


BLITZER: Leave it to Jeanne. Thanks very much.

That's all the time I have. Thanks very much for watching. I'm Wolf Blitzer in THE SITUATION ROOM. For our international viewers, "WORLD REPORT" is next. In North America, "JOHN KING USA" starts right now.